Optimal promotion planning for a product launch in the presence of word-of-mouth |
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| Institution: | 1. Department of Industrial Engineering, Sharif University of Technology, Tehran, 11365/8639, Iran;2. Graduate School of Management and Economics, Sharif University of Technology, Tehran, 11365/8639, Iran;1. School of Industrial Engineering, College of Engineering, University of Tehran, Iran;2. School of Business and Economics, RWTH Aachen University, Aachen, Germany;3. Centre for Research in Sustainable Supply Chain Analytics, Rowe School of Business, Dalhousie University, Halifax, NS, Canada;1. Ehrenberg-Bass Institute, UniSA Business, University of South Australia, City West Campus Level 4, Yungondi Building, North Terrace Adelaide, SA 5000, Australia;2. Massey University, Auckland, New Zealand;1. Stephen F. Austin State University, United States;2. University of Kentucky, United States;3. The Pennsylvania State University Abington, United States |
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| Abstract: | Marketing managers concern that Word-of-Mouth (WOM) can affect the efficiency of sales promotion policy. Sales promotion might also amplify the strength of WOM which further complicates decision-making. In this study, we deploy an agent-based simulation optimization framework to find an efficient sales promotion plan in the presence of WOM for launching re-purchasable products. In this model, consumers' purchase decisions are influenced by price history, availability and satisfaction of the consumers, and positive/negative WOM. We show that taking WOM on board while determining the promotion plan can significantly increase the net present value. However, amplifying WOM might damage the firm's profit for some product categories. |
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| Keywords: | Sales promotion optimization Word-of -mouth Agent-based modeling and simulation |
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